ML20136E326
| ML20136E326 | |
| Person / Time | |
|---|---|
| Site: | Millstone  |
| Issue date: | 01/21/1997 |
| From: | Blanch P AFFILIATION NOT ASSIGNED |
| To: | Mulley G, Zwolinski J NRC (Affiliation Not Assigned), NRC OFFICE OF PUBLIC AFFAIRS (OPA), NRC OFFICE OF THE INSPECTOR GENERAL (OIG) |
| Shared Package | |
| ML20136C110 | List:
|
| References | |
| NUDOCS 9703130177 | |
| Download: ML20136E326 (3) | |
Text
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l f2I2Ib From PAUL BLANCH <PMBLANCH91x.netcom.com>
To WND2. WNP3 ( j a z ), TWD1. TWP4 (gam), WND1. WNP9 ( opa), KPD1 ~....
Dates
.1/21/97 6:49am
. Subjects Courant January 21, 1997
.NU's fate linked to sister units By SUSAN E. KINSMAN This story ran in the Courant January 21, 1997
. Financial analysts said Northeast Utilities' weakened bond
- ratings, stock price and dividend could be forced even lower if two New Hampshire subsidiaries are forced into bankruptcy by unfavorable rules on competition.
This isn't a case of crying wolf. It's arithmetic, said Raymond E.
Moore,. senior vice president i
at Dillon Read, a New York brokerage house.
An NU' official told New Hampshire regulators Friday that two-subsidiaries there could face possible bankruptcy if rules for1 opening the Granite State
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market to competition are approved as l
proposed.
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NU, and its largest subsidiary, Connecticut Light & Power Co.,
would continue to operate. But the uncertainty about the New Hampshire subsidiaries would accelerate the financial slide that Legan early last year with the shutdown of the three Millstone nuclear power plants because of safety problems, analysts said.
Meanwhile, NU warned investors Monday that it expected to report a
significant fourth-quarter loss when it issues its year-end earnings Jan. 28. The company
. earned
$64.2 million, or 50 cents a share, for the last three months of 1995.
The company blamed most of the loss.on the sharp price increase for low-sulfur oil, which climbed.
from $19 a barrel in late spring to $25 a barrel in early December. The. price dropped in mid-January, to below $20 a barrel.
l The higher oil prices increased the cost of running its l
oil-fired-generating plants and of buying
[
replacement electricity for its idled nuclear plants.
NU said the price of replacement power for the three Millstone units increased from $80 million in the second quarter of_1996 to an estimated $110 million for the last three months of the. year.
9703130177 970306 PDR ORG NRRA PDR
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The company also expects to increase its reserves to cover future nuclear operation and maintenance l
costs beyond the $40 million set aside already. Other I
significant charges include $25 million spent to restore power to its customers following a two-day storm in early December - $10 million of t
i which will not be covered by insurance.
I Moore and other analysts assessed NU's situation Monday, based on '.he company's latest filing j
with the federal. Securities and Exchange Commission and comments I
thr.t Chief Financial' officer John Forsgren made Friday to New Hampshire. regulators.
New Hampshire's proposed valuation rule - unique among states that are moving to open electricity markets to. full competition - would force the utility to abandon regulatory accounting rules and write off between $700 million and $800 million in approved charges that have yet to be collected from customers.
Although that change alone would not force NU's Public Service i
.Co. of New Hampshire and North Atlantic Energy Service Co. into bankruptcy, it could trigger demands from creditors for payment of $1.2 billion in debt.
If they did, PSNH and North Atlantic wouldn't have enough money to pay off the debt and would have to seek bankruptcy protection, said Jeffrey R.
Kotkin, NU's director of investor relations.
The move could also force payment demands on approximately $300 million of NU's unsecured debt, Kotkin said.
NU has less than $600 million in equity in PSNH, which emerged from bankruptcy in 1991 and was acquired by NU in 1992.
New Hampshire's position is not only extremely harsh, but could be seen as a precedent in Massachusetts and Connecticut, which also are considering new rules on competition, said Barry M. Abramson, a utility analyst with Prudential Securities Research. NU has operating subsidiaries in both states.
The bankruptcy of the New Hampshire subsidiaries would have a direct impact on the credit
l rating of (the] parent company, and could affect other subsidiaries,
Abramson said.
It could also put pressure on the parent company.to reconsider its dividend policy.-
Forsgren plans to continue testifying today before New Hampshire regulators, who are expected to issue their final competition rules on Feb. 28. NU told the SEC that it would go to court if the final plan is adverse to the company's interests and financial condition.
l.
But based on the plans adopted or being considered in a dozen other states, the analysts are optimistic that the issue can be resolved in New Hampshire short of court.
I would make the assumption there will be a reasonable outcome, said Moore at Dillon Read.
The problem is that when things go to court you may win or l
lose, and nobody wants to be in that position.
Paul M. Blanch Energy Consultant 135 Hyde Rd.
West Hartford CT 06117 j
Tel: 860-236-0326 Fax:-860-232-9350 l
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